Lessor vs Lessee

The lessor refers to the person who owns the asset and allows the other person, known as the lessee, to use their asset by getting periodic rent in return. In contrast, a lessee refers to the person who uses the asset owned by another person, known as a lessor, for a specified period by paying some periodic rent per the terms of the agreement.

The process of leasing is very simple. It begins with the lessor giving his asset or property to the lessee. Then the lessee pays monthly agreed-upon lease or rent to the lessor. After the contract, the lessee returns the asset to the lessor. The lessor is the property owner and does not use it for its use; on the other hand, the lessee temporarily acquires the property and uses it for its use. The lessor can be an individual or an entity; the assets leased can be a building, vehicle, or even Industrial equipment and business equipment. The lease assets can also be intangible properties like computer software.

• A lessor is an individual or an entity who rents his property or asset to another individual or entity. The lessor can be used as a synonym for the owner or landlord. One key point to remember is that the lessor is responsible for repairs the lessee does not cause
• A lessee can be considered a synonym for a renter or a tenant. In financial terms, a lessee is a person we rent or loan something to. In return for this, the lessee pays rent or lease.

The key differences are as follows –

• The lessor is the owner and has the right to transfer the asset to anyone. However, the lessee is the temporary owner, who lies to the extent of the contract and the agreed payment.
• Possession is in the hand of the lessee while the ownership lies with the lessor.
• If the lessee gets bankrupt, the lessor has the right to get the payments first. The lessee has no relation to the bankruptcy of the lessor since he does not owe the lessee any money.
• Lessee has restrictive control over the property or the asset. Since the lessor is the owner, there is no restriction on him for property usage. However, permission is required when the property is under-lessee.
• The compensation paid to the lessor is the amount of lease or rent. However, the benefit to the lessee is the temporary use of the asset without having to invest the entire sum of money.
• The lessor can terminate the contract in case any damage is done to his property by the lessee or in case the lessee breaks any clause of the contract. The lessee can also terminate the contract in case of an unknown event like a flood or fire.
• As the asset owner, the lessor has the absolute right to take the asset or property from the current lessee and lend it to another lessee. However, this privilege is not given to the lessee. He does not have the right to give anyone else to use the property.

The contract, calculations of the lease, and valuation of the property all depend on the type of lease. It can either be an operating lease or a financial lease.  The lesser and the lessee are the two main parties of the contract which come together and form an agreement.

All the businesses today have some lease payments. Organizations find it feasible to take assets or property on the lease because they do not have to invest the entire amount of money and can still benefit from the entire asset.

This has been a guide to Lessor vs. Lessee. Here we discuss the top 12 differences between lessor and lessee, infographics, and a comparison table. You may also have a look at the following articles –

• Capital Lease Criteria
• Leasehold vs. Freehold
• Triple Net Lease
• Capital Lease vs. Operating Lease